Oilman Jim's Letter - August 31, 2024

Companies issuing interesting news last week

Reconnaissance Energy Africa (RECO.V RECAF 0XD.F) announced an operational update. The Naingopo exploration well is drilling beyond a depth of 2,400 metres or 7,875 feet, with surface casing set at 350 metres and a first casing string set at 1,200 metres. The company will soon be undertaking its next set of logging and coring activities and setting the second casing string targeted at approximately 2,600 metres or 8,530 feet. The well has been tracking to drilling depth and well cost estimates, on schedule and plan with the primary objectives beneath current drilling depth. The Naingopo well is targeting 181 million barrels of unrisked prospective light/medium oil resources or 937 billion cubic feet of prospective natural gas resources based on the most recent prospective resources report prepared by Netherland, Sewell & Associates. The well is targeting to drill to a depth of approximately 3,800 metres or 12,500 feet and is expected to encounter four primary reservoir intervals targeting both oil and natural gas. If successful, the well would be a major play opening discovery providing access to multiple drill ready prospects. Elsewhere on PEL 73, the company continues to make progress in the construction of the access road for the second Damara Fold Belt exploration well, Prospect P, which is expected to start drilling in the fourth quarter of 2024. Prospect P is targeting 309 million barrels of unrisked prospective light/medium oil resources or 1.6 trillion cubic feet of prospective natural gas resources based on the most recent prospective resources report prepared by Netherland Sewell…more

Helium One Global (HE1.L HLOGF HE1.F) announced that it has completed the first phase of the extended well test at Itumbula West-1 and flowed up to 7.6% helium to surface. The company is now in the process of undertaking the second extended well test in the fractured basement. Separately, HE1 announced that it has entered into a conditional binding heads of agreement pursuant to which the company has agreed to acquire a 50% legal and beneficial interest in the Blue Star Helium (BNL.ASX BSNLF) Galactica-Pegasus project in Colorado, as well as a similar interest in leases associated with 61,000 gross acres in Las Animas County. To fund the acquisition, the company also announced that it has raised gross proceeds of £6.43 million (approximately $8.2 million) by a direct subscription pursuant to a cash box structure, through the issue of 590 million new ordinary shares at a price of 1.09 pence per share. The Galactica project contains confirmed discovery wells flowing an average of 3% helium as free gas, at which concentration the company estimates a resource estimate of 675 million cubic feet. An initial six development well programme is planned for Q4 2024 which is expected to be on stream and producing in H1 2025…more…more

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Valeura Energy (VLE.TSX VLERF 83PN.F) announced the successful ramp-up of oil production at its Nong Yao C development in Licence G11/48, offshore Gulf of Thailand. The greater Nong Yao complex is now operating at its full processing capacity, with stable average production over the past seven days of 13.4 thousand barrels of oil per day (12.1 thousand barrels of oil per day net to the company’s 90% working interest share, before royalties). This production when combined with the Wassana field (now back online) has resulted in stable aggregate oil production over the past week of 26.2 thousand barrels of oil per day (company’s working interest share, before royalties). Production at Nong Yao C is said to have been stable for the past week from six of the development wells. A seventh well is expected to be started within the coming weeks, to create spare production capacity. The work programme for the remainder of the year entails drilling infill development wells at both the Jasmine and Manora fields to offset declines, and to bolster the company’s plan to maintain production at approximately 25 thousand barrels of oil per day for at least the next four months. Valeura is strongly cash generative and is currently evaluating options as to how best to deploy its net cash…more

Harbour Energy (HBR.L PMOIF PQQ0.F) announced that it now expects to complete the acquisition of the Wintershall Dea asset portfolio in early September, versus previous guidance of early in the fourth quarter. This follows considerable progress being made on satisfying the conditions to completion, including recent receipt of Mexico regulatory consents. The acquisition, which is said to be transformational, includes all of Wintershall Dea's upstream assets in Norway, Germany, Denmark, Argentina, Mexico, Egypt, Libya and Algeria, as well as Wintershall Dea's CO2 capture and storage licences in Europe. The acquisition will add 1.1 billion barrels of oil equivalent of 2P reserves at around $10/barrel of oil equivalent and more than 300,000 barrels of oil equivalent per day of production. Harbour hence becomes one of the world's largest and most geographically diverse independent oil and gas companies…more

Sunda Energy (SNDA.L) announced that it has submitted applications for two offshore licence areas in the Philippines which contain several material gas discoveries and significant upside potential. Sunda says it has been actively screening new business opportunities in Southeast Asia, which include a number of possible new ventures where significant interests in material gas assets with low costs of entry may be accessed. One of these initiatives has resulted in the licence round applications being made in the 1st Conventional Energy Bid Round of the Bangsamoro Autonomous Region of Muslim Mindanao in the Philippines. These applications have been made in a joint venture partnership with three other companies and, if successful, Sunda expects to hold a 37.5% non-operated interest in any resulting service contracts that are awarded. Meanwhile, the company is focussed on its upcoming appraisal activities on the Chuditch field in Timor-Leste…more

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Africa Oil (AOI.TSX AOIFF AFZ.F) announced the completion of its strategic farm down agreement with TotalEnergies (TTE TTE.L) and QatarEnergy for the Orange Basin block 3B/4B, offshore South Africa. The company has retained a direct 17% interest in block 3B/4B and transferred the operatorship of the block to TotalEnergies. The transaction has a value of up to $46.8 million to Africa Oil, which will receive staged cash payments for a total cash payment of $10 million of which $3.3 million is now due, and the remaining balance in two successive payments conditional upon achievement of key operational and regulatory milestones. Africa Oil will also receive a full carry of its 17% retained share of all JV costs, up to a cap, repayable to TotalEnergies and QatarEnergy from production in case of exploration success and development, which is expected to be adequate to fund the company’s share of drilling for up to two wells on the licence. Under a separate agreement between Africa Oil and Eco (Atlantic) Oil & Gas (EOG.V ECO.L ECAOF EOI.F), the company will acquire an additional 1% in block 3B/4B in exchange for the cancellation of all common shares in Eco and warrants over Eco common shares held by Africa Oil. On completion, the interests in block 3B/4B will be comprised of: 18% held by Africa Oil, 33% held by TotalEnergies, 24% held by QatarEnergy, 19.75% held by Ricocure and 5.25% held by Eco. Block 3B/4B covers an area of 17,581 km2 within the Orange Basin offshore South Africa in water depths ranging between 300 metres and 2,500 metres. This block lies to the southeast and on trend with number of oil discoveries including the Venus discovery. There is approximately 14,000 km2 of 2D seismic and 10,800 km2 of 3D seismic over block 3B/4B and a large opportunity set of exploration prospects has been identified…more…more…more

Falcon Oil & Gas (FO.V FOG.L FAC.F) announced commencement of the 2024 drilling programme with the spudding of the Shenandoah South 2H horizontal well in exploration permit 98 in the Beetaloo Sub-basin, Northern Territory, Australia with the company’s joint venture partner, Tamboran Resources (TBN.ASX TBNRL). Following the drilling of the 2H well, Tamboran will immediately move to the Shenandoah South 3H well off the same well pad location ahead of the stimulation program. Both wells will include a horizontal section of approximately 3,000 metres and will target the Amungee Member B-shale at an estimated target depth of 3,020 metres. Each well is expected to be drilled in 30 days. The wells will be stimulated with up to 60 stages and initial flow test results from each well are expected in Q1 2025. Once flow testing is complete, both wells will be suspended as future producers to supply the proposed 40 million cubic feet per day Shenandoah South pilot project, which is expected to commence production in H1 2026. An additional four well program is planned for 2025 which will complete the drilling. Falcon holds a participating interest of 5% and Tamboran 38.75%…more…more

Longboat Energy (LBE.L 8YG.F) announced a strategy/company/operations update. The company’s near-term focus remains on what Longboat describes as its transformational Malaysian activities. The farm-out of block 2A is well underway and the company says it remains confident of executing a transaction during Q4 2024. Negotiations on a production sharing contract are said to be nearing completion. The negotiations have involved multiple parties, including federal and state entities, and are anticipated to be announced in the coming weeks. To reflect the recent change in strategic focus, the board has decided to rename and rebrand the company as Seascape Energy Asia and change its London ticker symbol to SEA.L. The changes will be effected in the coming weeks and a further announcement will be made in due course…more

Zephyr Energy (ZPHR.L ZPHRF VD5N.F) announced an update regarding the production test on the State 36-2R LNW-CC well and the Company's farm-in to the Salt Wash helium project, a previously producing asset with proven oil, gas and helium reserves located three miles to the south of Zephyr's Paradox project in Utah. A term in the farm-in agreement is the requirement for Zephyr to commence drilling operations on a well on the farm-in acreage by September 1, 2024 and initial operations at the site of the proposed commitment well now have commenced, including drilling pad preparation and fencing the perimeter of the site. In the coming weeks, a spudder drilling rig will be mobilised to the well location and a 30-inch hole will then be drilled to a depth of approximately 100 feet and 20-inch conductor casing will be set. While activity on the pad has begun, Zephyr does not expect full drilling operations to commence until the first half of 2025, in line with its operational commitments to the field leaseholders. The company says it remains in active conversations with industry and financial parties regarding the potential funding of up to 100% of the costs of the well at the asset level, and the board of directors continues to appraise the available options. At the State 36-2R well, the acidisation operation was executed successfully, following which a second phase of production testing and related evaluation commenced and is ongoing. The Company plans to conclude its technical analysis and expects to announce the results from the test within the next ten days…more

HyTerra (HYT.ASX HYTLF) announced that Fortescue (FMG.ASX FSUGY) will invest A$21.9 million to acquire a 39.8% interest in the company, subject to HyTerra shareholder approval. The company is exploring for hydrogen and helium resources within its 100% owned and operated Kansas leases and the subscription by Fortescue will fully-fund an expanded initial exploration phase of its Nemaha project facilitating a significant increase in pre-drill acreage. This will result in increased drilling of prospects in several identified geological play areas, enhancing HyTerra’s potential to unlock commercial opportunities in the Mid-West of the United States. A strategic alliance agreement also is to be agreed between HyTerra and Fortescue as soon as practicable following the completion of the subscription. The purpose of this agreement will be to facilitate collaboration on the Nemaha project and progress global opportunities. HyTerra will then drill six wells across multiple geological plays to choose the best areas to develop and through the strategic alliance with Fortescue use this knowledge and data to pursue other global opportunities. It is the intention of HyTerra to use the subscription funds to increase its lease acreage, execute geophysical surveying and drill six exploration wells in the Nemaha project…more

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